7-eleven Fits Into Lifestyle Of Japan

TOKYO -- One measure of the success of 7-Eleven in Japan is that most Japanese are surprised to learn that the chain of convenience stores was made in America.

The inspiration may have been American, but it has been so well adapted to Japanese shopping habits and to the economy`s retailing and distribution routines that 7-Eleven has become almost synonymous with convenience store here. In parts of Tokyo, the stores with their bright red, green and orange logotypes seem to dot every street corner.

The name and concept for 7-Eleven Japan, a subsidiary of Ito Yokado, the Japanese retailing giant, are licensed from the Dallas-based Southland Corp. Introduced 12 years ago as the first ``convenience`` store in Japan, the chain now dominates the field. As of Jan. 31, the end of the company`s fiscal year, the chain operated 2,001 stores. Its closest competitor, Law-son`s, begun in 1980, has 782.

The company has recorded consistently high increases in profit. The stock of 7-Eleven Japan is among the highest-priced on the Tokyo Exchange, and analysts predict continued rapid growth.

Like other American chains, such as Mr. Donut, McDonald`s and Kentucky Fried Chicken, 7-Eleven Japan has successfully transplanted American concepts of fast food, franchising and convenience shop-ping.

But 7-Eleven Japan has added touches of its own to satisfy Japanese consumers. For example, many Japanese do not stock their larders with canned or frozen foods, preferring to shop daily for fresh foods. So, the stores get twice-daily deliveries of fresh foods such as rice balls and sashimi.

The chain also boasts a data analysis system that manages store inventories with a fine touch and a marketing system that targets an area and then floods it with stores, shutting out the competition. It also promotes close relationships between the franchise store and headquarters. And typical of a large Japanese company`s involvement in its employees` lives, 7-Eleven has even introduced prospective mates to its store owners.

Shuichi Iwakuni, a managing director, said that his company learned the concept of convenience stores and certain aspects of franchising from Southland, but that the links ended there. The company pays Southland an annual license fee, but declines to say how much.

``It may not be an exaggeration,`` he added, ``to say that in all other ways, what we do is greatly dif-fer-ent.``

Whatever the mix, 7-Eleven`s formula has been enormously profitable. Its net income for its fiscal year ended Jan. 31 rose 36.5 percent, to $30.6 million. Its six-month results from February to August increased 35.3 percent, to $25 million, compared to the same period last year.

As of this August, the chain said, gross profit was running at 27.4 percent of sales. Iwakuni attributed much of that growth to the expansion of the fast-food market, which now makes up nearly 20 percent of total store revenues.

But analysts also note that 7-Eleven was introduced in Japan at an opportune time.

``This kind of store was well suited to the Japanese people`s changing lifestyle, such as the increase of two-income and single households`` and teen-agers staying up later at night, said Setsu Yamazaki, an analyst with Merrill Lynch Capital Markets.

She and other analysts said that innovative management techniques had assured that the chain stayed ahead of its competitors.

According to Iwakuni, 7-Eleven Japan learned a franchising formula from Southland. Under its franchise terms, 7-Eleven Japan guarantees its franchisees a minimum profit of $63,800, pays 80 percent of the utility bills and all of the advertising. In return, the franchisee must give 7-Eleven 45 percent of the profits, a rate that Miss Yamazaki said was the highest in the industry.

The chain has also embraced Southland`s marketing strategy of dominance. That involves carefully selecting a target area and then flooding it with 40 to 60 stores, which not only shuts out competition but also builds visibility and promotes efficient distribution.

The chain also capitalized on areas that might have otherwise proved to be weaknesses, Iwakuni said. Land is scarce, and stores are necessarily smaller. The average shop in Japan is only half the size of its American counterparts and can stock only about 3,500 products. This has forced 7-Eleven Japan to practice strict inventory control, reducing average inventory per outlet from $39,750 in 1975, to $22,850 this year.

Its point-of-sales system, highly praised by analysts, was introduced two years ago. Almost all products are bar-coded and the system can provide a record of the time of day and the amounts sold. The company can use that data to vary products according to seasonal tastes and reduce inventory without compromising sales.